Masonry Magazine June 1997 Page. 10
Business Planning
And the outcome was a statement of where we were going that has given us a critically important focus. We have emphasized those things we do well and eliminated those projects which we had a problem completing on a profitable basis.
While the Hayes and Parker example emphasizes the upside potential, the H.K. Walden Company example demonstrates the value of planning in avoiding potentially disastrous situations.
H.K. Walden Company
H.K. Walden Company was truly a family affair. Founded by Henry K. in 1973, his wife, Melissa, did the bookkeeping, his eldest son, Henry, Jr. ran the major projects and his younger son, Charles, did some of the estimating and handled some of the smaller projects. Charles' wife, Marion, worked part-time as a secretary and their daughter worked in the office after school. For his part, Henry K. handled the two major ongoing projects and the company's business development efforts.
Towards the end of Henry K.'s 60th birthday party, Henry Jr. took his father aside. "Dad, do you realize how dependent this family is on the business? What would happen if you were taken ill? You brought in 90% of the business last year. And the rest came from people who knew you. Without you, we'd be out of business."
Despite his protestations that he would outlive them all, Henry K. was struck by the validity of the observation and, some weeks later, called a meeting of the family plus two key non-family members to discuss what they should do. The outcome of this meeting was an agreement that Henry, Jr. would take over responsibility for the management of all projects (including the two major ones). A new estimator would be hired and Charles would hand over his involvement in this to this individual and would join his father in working with clients. Finally, Marion would become full-time as the office manager.
Eighteen months later, Henry K. was badly injured in a car accident and was in hospital for many months. Yet the company's operations hardly missed a beat. "That planning session was the most important thing we have ever done," Henry, Jr. commented. "Without it, I don't think we would have survived."
These two examples show the importance of planning. Planning not only helps define where your organization is going but also how it is going to get there... and what it is going to do if disaster strikes.
So, why (if it is vitally important) do so many contractors fail to plan for their business? Why do so many contractors ignore this important activity?
Once again, it is easy enough to understand their reluctance to plan. Business planning is:
Time consuming
Planning requires thought and effort. And, per se, it isn't an income generating activity. The connection between planning and profitability is often far from direct.
A low priority activity
From the perspective of the typical contractor, there is always one fire or another that needs extinguishing. Even if the individual sees business planning as important, it isn't high on his/her list of things to do.
A fearsome task
Some contractors are very afraid of the planning process. Some fear it as being a largely intellectual (and thus unproductive activity) while others suspect that actually putting the plan of action down on paper will be a mistake.
A complex and sophisticated activity
Many people see planning as a very complex and sophisticated activity.... and it can be. It can also be a relatively simple activity; certainly nothing of which to be afraid.
And, finally:
The success of non-planners
There are always examples of successful firms that do no planning (or at least appear to do no planning) and thus are cited as a reason for not doing any. "Old Joe has never done any planning in his life and look how successful he is!"
It is worthwhile looking at this last argument in a little more detail. First, many firms do do much more planning (if in an informal manner) than they would admit to. It is as if there were something negative about the idea of business planning... and thus they will not admit to doing any.
Second, the owner or president of the company often has a tremendous amount of knowledge in his/her own head. He/she has been involved in the business for many years and thus knows the marketplace, the competition, etc. They are, in effect, "planning in their heads." It is not written down (even on the back of an envelope) but it does exist in an intangible form.
Unfortunately, the marketplace is changing. For most contractors, it is becoming increasingly complex and competitive. Success in the years ahead will require new skills coupled with the building of a team of reliable